Sometimes it does it subtly and sometimes it does it obviously, but regulation always changes the market place in ways we may not understand. It seems to me that Consumer Law attempts to give power to consumers because some people are convinced that large firms have all the power. But do they?

In a free market every trade is voluntary. There is no legal method to initiate force. Not even government can initiate it. Free market advocates often complain that there is no need for anti-trust or consumer law.

Take, for example, the scenario of a dominant market player (like Intel) using its size to drive other players out of a particular market by lowering its prices so much that they are sometimes selling below cost.

How does the consumer lose in that example? Down the line Intel can raise its prices back up and gouge the consumer with monopolistic pricing. This fear has driven many anti-trust cases. In mixed markets it is common to have many roadblocks to start a new business or to compete in a new market. India had this problem for a long time. It sometimes took years to get through the red tape to start a new venture.

In a free market, a market which has no regulations whatsoever, there is nothing which inhibits competitors from entering the market when prices inevitably go back up. In a free market would lowering retail prices below cost result in dominance in the market? Yes, but only as long as the price remained low.

Unlike the mixed market which forces the need to stop those “unfair” practices like lowering retail prices, the free market allows price to drive the market. Charge too much and competitors will enter driving your price back down. Charge too little and you will eventually not make your payroll.

Either way, the consumer wins in a free market. In a free market society, it is far less likely that we will see price being used to drive others out of a market because it is more likely to fail than it is in a mixed market.

Mixed market systems create the need for anti-trust laws and for consumer laws. The free market does not impose rules on the market and does not allow government to add new rules, thus eliminating the need for anti-trust and consumer law.

Digg!